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Nothing illustrates the regional divergence in Canada’s economy like housing. While house prices continue to surge in the already most over-valued markets in Vancouver and Toronto, Calgary and other areas most affected by the collapse in commodity prices …
10th February 2016
While negative interest rate policies are being adopted by some major central banks, economic growth and inflation in Canada will be buffered by fiscal policy stimulus and the past depreciation of the Canadian dollar. Accordingly, we don’t foresee the …
5th February 2016
The weaker than expected 5,700 decline in employment in January, was a poor start to the year and provides more evidence that the economy is struggling to cope with the collapse in oil prices. The unemployment rate rose to 7.2%, from 7.1%, and we expect …
The sharp drop in oil prices and the Canadian dollar have led to a rapid deterioration in Canada’s economic outlook, overwhelming the ability of policymakers to stabilise the economy with conventional stimulus. We expect GDP growth to be less than 1% in …
3rd February 2016
The sinking Canadian dollar has prevented the annual core CPI inflation rate from falling below the mid-point of the Bank of Canada 1% to 3% inflation target range, despite the worsening economic downturn and growing slack in the economy. But tentative …
29th January 2016
After stagnating in October, the economy grew by 0.3% m/m in November, albeit partly on account of what we believe was a very short-lived rebound in oil production. As things stand now, we estimate that GDP was stagnant in the fourth quarter. … GDP by …
Despite a rapidly deteriorating outlook, the Bank of Canada defended its recent inaction on interest rates on the basis of it not knowing the details of the upcoming Federal budget, due to be delivered sometime in April. But if that budget fails to admit …
22nd January 2016
Despite lower energy prices, the annual headline inflation rate climbed to 1.6% in December, from 1.4%, as the massive decline in the Canadian dollar continues to boost some prices. Core inflation fell slightly to 1.9%, from 2.0%, but that decline was …
The Bank of Canada’s decision to hold its key policy rate at 0.50% today doesn’t mean that further rate cuts are off the table entirely. The Bank sounded far more downbeat about the economic outlook because of the worsening commodity price shock. But …
20th January 2016
Although the rebound in manufacturing sales in November was stronger than most expected, it wasn’t enough to offset similar declines in the previous three months. Accordingly, manufacturing activity apparently declined quite sharply in the fourth quarter …
The plunge in the Canadian dollar to a thirteen-year low of US$0.69 has forecasters jumping on the bearish bandwagon with increasingly pessimistic forecasts for the year ahead, mainly over fears that the global economy is in a meltdown. We think this is …
15th January 2016
We expect the Bank of Canada to cut its key policy rate by 25 basis points to 0.25% next week, which is much sooner than most investors anticipate. The incoming data suggest that the economy contracted in the final quarter of last year, and was therefore …
13th January 2016
House price inflation rose slightly to a four-year high of 6.2% in December, from 6.1%, but the home-sales-to-listings ratio indicates that this is close to the peak. … Teranet-National Bank House Prices …
The Bank of Canada's fourth-quarter update on business intentions suggests that the economy is slipping back into recession, with shrinking investment soon to be accompanied by a downturn in employment. The further slump in prices of oil and other …
11th January 2016
While the majority of investors expect another interest rate cut from the Bank of Canada by the middle of this year, most of them don’t realise just how weak the economy is right now and the urgency for additional policy stimulus. With signs warning that …
8th January 2016
Employment rose by a stronger than expected 22,800 in December, but the breakdown continued to reveal disturbing trends in private sector and higher paid prime-age employment, which are more accurate signals of economic conditions. … Labour Force Survey …
The modest rebound in export volumes in November wasn’t enough to offset the much larger decline in the previous month, suggesting that exports contracted over the fourth quarter as a whole. As things stand now, our calculations suggest that GDP …
6th January 2016
After contracting by 0.5% m/m in September, the economy began the fourth-quarter poorly, with GDP unchanged in October. While non-conventional oil production rose modestly, declines elsewhere indicate that the economy is struggling to deal with the …
23rd December 2015
We fear that households are utterly unprepared for the normalisation of market interest rates that began with the US Fed’s historic lift-off last week. Canada’s economy has long been overly reliant on household consumption and housing as drivers of …
18th December 2015
The increase in annual headline inflation to 1.4% in November, from 1.0%, was largely as expected given the diminishing drag from lower energy prices. Meanwhile, core inflation remained close to the 2.0% mid-point of the Bank of Canada’s target range, …
The significant fall in manufacturing sales volumes in October, the third monthly decline in a row, provides more evidence that the economy has lost considerable momentum this quarter, possibly to the point of outright stagnation. … Survey of …
15th December 2015
House price inflation rose to a four-year high of 6.1% in November, from 5.6%, but the existing home sales-to-new listings ratio indicates that this might be the peak. … Teranet-National Bank House Prices …
14th December 2015
While we have long argued that the fallout from the oil shock would be disruptive and that hopes for an export revival were misplaced, we doubt that the Bank of Canada will need to resort to negative interest rates or quantitative easing anytime soon. …
11th December 2015
The rebound in third-quarter real GDP has prompted some commentators to conclude that Canada’s recession is officially over. But the real GDI measure, which incorporates important terms of trade effects on real income earned from production, reveals a …
4th December 2015
The loss of 35,700 jobs in November and the uptick in the unemployment rate to 7.1%, from 7.0%, was party related to the completion of the recent Federal election. The significant loss in private sector jobs is a concern, however, suggesting that the …
The Bank of Canada’s decision to leave its policy rate at 0.50% today was as expected given that the economy returned to positive growth in the third quarter. Although it believes economic growth will accelerate next year and is neutral on the interest …
2nd December 2015
The 2.3% annualised rebound in GDP in the third quarter might convince some that the economy is adjusting well to lower oil prices, but the 0.5% m/m contraction in September illustrates that the economy isn’t out of the woods. This suggests that even our …
1st December 2015
The evidence suggests that the economy stumbled at the end of the third quarter, casting doubt about its capacity to survive the worsening oil price collapse. With non-exports misfiring and business confidence and investment tepid, we wouldn’t bet on any …
27th November 2015
We expect the Bank of Canada to hold its key interest rate 0.50% next week and remain neutral on the direction of its next potential move. While highlighting the further slide in oil prices as a greater downside risk to the economy, the Bank’s abiding …
25th November 2015
Canada’s new Federal Finance Minister has indicated that the government will forge ahead with its deficit-funded spending plan in an effort to support a flagging economy. Even if that means running larger deficits than planned, however, it shouldn’t worry …
20th November 2015
The annual headline inflation rate was unchanged at 1.0% in October but will soon rise sharply, as the drag from lower gasoline prices fades. Meanwhile, core inflation will stay close to 2.0% as the pass-through effects from the lower Canadian dollar …
The further decline in manufacturing sales volumes in September and the downward revision to August provides more evidence that the economic recovery from the mild recession in the first half of the year has lost some steam. … Survey of Manufacturing …
16th November 2015
The fallout from the oil price shock has triggered a significant slowdown in hiring according to the large payroll employment survey, despite evidence to the contrary from the more popular household employment survey. Closer examination of the latter, …
13th November 2015
House price inflation remained at 5.6% in October and the high home sales-to-new listings ratio indicates that it might rise as high as 6.0% by the end of the year. The national average continues to be boosted by Vancouver and Toronto, whereas prices in …
12th November 2015
Recent headline employment gains mask a deterioration in underlying labour market conditions. If, as we fear, the economy continues to struggle in response to the worsening oil price slump, then growing labour market slack will add to the downward …
10th November 2015
Investors who have paid attention to indicators of growing imbalances in Canada’s hot housing market over the years won’t be surprised by recent warnings of potential housing corrections from certain government officials. While these officials argue that …
6th November 2015
The 44,400 gain in employment in October was stronger than anyone expected and an indication the economy is withstanding the oil shock better than previously thought. While the details weren’t quite as good, this latest jobs report will give confidence to …
Although the mild recession in the first half of this year has ended, the drag from falling business investment triggered by the slump in oil prices is far from over and growing imbalances in the housing market threaten to topple the economy. What’s more, …
4th November 2015
Exports lost momentum during the third quarter, with volumes stagnating in September after falling in August, suggesting that the economy is unlikely to sustain the estimated 2.5% annualised GDP growth it managed in the third quarter. … International …
Given the success of inflation targeting at lowering trend inflation and anchoring inflation expectations, the formal inflation-control agreement between the Bank of Canada and Federal government isn’t likely to be changed next year. We do, however, …
30th October 2015
Canada’s economy grew by only 0.1% m/m in August, much slower than in the previous two months. Those gains in June and July mean that the economy still grew by close to 2.5% annualised in the third quarter. But with even lower oil prices threatening the …
Financial markets are going cold on the prospect of another rate cut from the Bank of Canada. The Bank has already cut rates twice this year in response to the oil shock. Although the economy may no longer be in recession, it is still struggling to get …
28th October 2015
Canada’s growth outlook is one of the weakest among G7 members and other advanced economies. Low commodity prices are the main reason for this. With falling business investment weighing the economy down and imbalances in the housing market threatening …
23rd October 2015
The 0.2% m/m decline in consumer prices in September, which pushed the annual inflation rate down to 1.0%, from 1.3%, was almost entirely due to a big slump in gasoline prices. Gasoline prices fell by 7.9% m/m, while the annual rate of decline in gasoline …
The 0.7% m/m gain in retail sales volumes in August was larger than we had assumed and indicates that a stronger showing in third-quarter real consumer spending is an upside risk to our overall GDP growth estimate of 2.5% annualised. … Retail Sales …
22nd October 2015
The Bank of Canada’s decision to hold its policy rate at 0.50% was as expected given that the economy most likely returned to positive growth in the third quarter. The uncertain outlook, however, prompted the Bank to downgrade its GDP growth projections, …
21st October 2015
The Liberal party’s surprise majority Federal election victory has been shrugged off by financial markets, which is a good thing considering the already uncertain economic outlook. The Liberals pledge to run small budget deficits, though, will only …
20th October 2015
Canada’s inflation target agreement between the Federal government and the Bank of Canada is up for renewal next year and the conventional wisdom is that it doesn’t need fixing. In contrast, we think there is a strong argument to be made that inflation …
16th October 2015
The slight decline in manufacturing sales volumes in August echoes the decline in exports already reported for that month, providing more evidence that the recovery from the first-half recession is already losing steam. The gains at the start of the third …
The rate of house price inflation rose to 5.6% in September and the elevated sales-to-new listings ratio indicates that it will accelerate to 6.0% by the end of the year. The national average continues to be boosted by rapidly rising prices in Vancouver …
15th October 2015
